When
President
Joe
Biden
announced
his
student
loan
forgiveness
proposal
back
in
November,
it
was
immediately
challenged
in
court
by
individuals
and
six
attorneys
general
of
Republican-controlled
states.
Most
observers
predicted
that
it
would
be
struck
down
by
the
Supreme
Court’s
six
Republican-appointed
justices.
Standing,
or
whether
the
plaintiff
has
suffered
an
injury
that
can
be
redressed
by
the
courts,
was
an
issue
in
this
case.
The
Court
issued
two
decisions
where
they
denied
standing
to
the
plaintiffs
because
they
did
not
suffer
a
harm
that
could
be
traced
to
the
defendant.
Many
observers
thought
this
was
a
hint
as
to
how
the
Court
would
decide
as
the
reasoning
could
be
applied
to
this
case.
So
it
gave
some
borrowers
hope
that
loan
forgiveness
would
be
allowed.
Throughout
this
Court’s
term,
the
student
loan
cases
were
probably
the
most
closely
watched
and
talked
about.
So
it
was
possible
that
the
Court
could
issue
a
compromise
opinion.
My
prediction
was
that
the
Court
would
rule
that
the
states
and
the
individuals
had
no
standing.
However,
the
majority
opinion
would
explain
how
the
future
plaintiffs
can
easily
obtain
standing
in
a
future
lawsuit.
A
majority
concurring
opinion
would
state
that
if
the
case
is
brought
back
to
the
Court,
it
will
be
struck
down
on
the
merits
using
the
major
questions
doctrine
(MQD)
as
the
student
loan
issue
had
great
political
and
economic
significance
and
thus
requires
congressional
approval.
This
outcome
would
ensure
that
a
future
president
would
not
do
this
again
without
congressional
approval.
Also,
it
would
improve
the
Court’s
public
image,
which
could
temper
those
who
call
for
packing
the
Court.
Last
Friday,
the
Court,
in
the
final
day
of
the
term,
issued
the
first
of
its
two
student
loan
decisions.
In
the
first
case,
the
Court
unanimously
ruled
that
the
two
individual
plaintiffs
lacked
standing
to
sue.
At
that
point
almost
everyone
thought
that
that
was
the
final
decision
and
that
student
loan
forgiveness
was
upheld.
But
a
minute
later,
the
Court
announced
its
second
decision,
where
it
ruled
that
the
six
plaintiff
states
had
standing
to
sue
and
that
Biden’s
loan
forgiveness
proposal
required
congressional
approval
under
the
MQD.
Soon
after
the
decisions
were
released,
Biden
issued
a
statement
condemning
the
decision,
stating
that
he
would
pursue
loan
forgiveness
options
using
the
Higher
Education
Act
(HEA).
However,
he
and
the
secretary
of
education
cautioned
that
this
must
go
through
the
regulatory
approval
process
first,
which
can
take
some
time.
He
also
announced
a
new
program
called
Saving
on
a
Valuable
Education
(SAVE).
Some
of
the
key
features
of
SAVE
are:
-
Income
minimums
have
been
increased
before
borrowers
are
required
to
make
payments
on
their
loans. -
Payments
on
undergraduate
loans
will
be
reduced
from
10%
to
5%
of
discretionary
income. -
Starting
in
July
2024,
borrowers
with
original
principal
balances
of
$12,000
or
less
will
receive
forgiveness
of
any
remaining
balance
after
making
10
years
of
payments,
with
the
maximum
repayment
period
before
forgiveness
rising
by
one
year
for
every
additional
$1,000
borrowed.
For
example,
if
your
original
principal
balance
is
$14,000,
you
will
see
forgiveness
after
12
years.
Payments
made
previously
(before
2024)
and
those
made
going
forward
will
both
count
toward
these
maximum
forgiveness
time
frames. -
Various
interest
deferral
provisions
and
credits
toward
forgiveness
for
certain
periods
of
deferment
and
forbearance.
Lastly,
Biden
stated
that
those
who
cannot
pay
their
outstanding
loans
have
12
months
before
their
account
is
sent
to
collections
and
a
negative
report
is
sent
to
a
credit
agency.
It
was
called
an
on-ramp
program
to
help
borrowers
transition
to
repayment.
However,
interest
will
continue
to
accrue.
In
general,
Biden’s
backup
plan
makes
things
more
complicated.
First
is
the
on-ramp
transition
program
which
suspiciously
sounds
like
another
payment
moratorium.
Due
to
Biden’s
numerous
payment
extensions
despite
each
one
being
the
“final”
extension,
Congress
passed
a
law
which
prohibited
future
extensions.
But
according
to
Biden,
the
on-ramp
program
is
not
a
“pause.”
Assuming
there
is
no
outside
intervention,
it
is
very
possible
that
when
the
transition
period
ends
in
July
2024,
there
will
be
another
extension
that
lasts
until
November
2024.
Second,
both
the
on-ramp
program
and
the
proposed
reduced
payment
amounts
for
those
on
IDR
can
create
problems
in
the
long
run
when
it
comes
to
interest
accrual.
While
there
is
supposedly
a
cap
on
interest
accrual,
few
are
clear
as
to
how
it
will
work.
This
can
result
in
some
people
seeing
bigger
balances
in
the
future.
And
those
who
have
more
financial
options
and
resources
might
opt
to
exploit
the
interest
deferral
and
not
pay
their
loans
if
it
is
more
profitable
to
do
so,
especially
with
high-yield
savings
accounts
currently
approaching
up
to
5%
APR
pre-tax.
Also,
there
is
the
matter
of
future
loan
forgiveness
under
the
HEA.
No
one
knows
when
Loan
Forgiveness
2.0
will
be
announced,
but
few
would
be
surprised
if
it
comes
during
the
election
campaigns
next
year.
If
Biden
proposes
another
massive
forgiveness
program,
the
Supreme
Court
will
again
strike
it
down
using
MQD.
Missouri
will
again
sue
because
it
will
have
standing
through
MOHELA
even
though
its
employees
seem
to
have
no
interest
in
litigating
this
matter.
Whether
this
will
trigger
an
exodus
of
MOHELA’s
current
customers
to
another
federal
student
loan
servicer
is
uncertain.
For
about
one
minute,
we
had
student
loan
forgiveness.
But
then
the
Supreme
Court
pulled
a
sike,
and
borrowers
were
left
with
a
backup
plan
that
leaves
unanswered
questions
and
may
require
the
vulnerable
to
make
financially
complicated
decisions.
In
the
long
run,
borrowers
should
have
a
financial
plan
to
pay
off
their
loans
or
prepare
for
forgiveness
at
the
end
of
their
income-based
repayment
term.
Steven
Chung
is
a
tax
attorney
in
Los
Angeles,
California.
He
helps
people
with
basic
tax
planning
and
resolve
tax
disputes.
He
is
also
sympathetic
to
people
with
large
student
loans.
He
can
be
reached
via
email
at
stevenchungatl@gmail.com.
Or
you
can
connect
with
him
on
Twitter
(@stevenchung)
and
connect
with
him
on LinkedIn.